MLM 720                Introduce to commercial Law

INTRODUCTION

The core purpose of this assignment will be to analyse how the neighbourhood principle which is related to pure economic losses is interpreted by the courts. In order to simplify and understand the decision the courts to made regarding negligence involving pure economic loss; we are first required to understanding what negligence means. The torts of negligence have specific elements which are the complex concept of legal duty of care, breach, causation and damage thereby suffered to the person whom the duty owed.

I shall give a short definition of pure economic losses relevant in tort law and what is implied in the neighbourhood principle interface in tort law.  

The definition for pure economic loss can be articulated as economic loss which is unaccompanied by physical injury or damage. It is also commonly known that pure economic loss is an umbrella term used to bring together various different policies regarding compensation, damages, lost income and loss.

We therefore must discover the connections and differences between recovering damages or compensation in regard to pure economic loss in the neighbourhood principle.

In the neighbourhood principle, to ask the question of whether C owes D a duty of care. The courts then hold the defendant liable to whether C ought to take care to look after D’s interest. 

In the neighbourhood principle, the neighbour is defined as, “Persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.”

NEGLIGENCE

The law of negligence can be broadly argued in the context of our daily life activities to areas such as supplying and providing of services or tasks, as a manufacturer to consumer, employer to employee, teacher to student, and much more.

A duty of care was originally established by applying the neighbourhood test from: Donoghue V Stevenson (1932. In this case, a woman became ill after dinking some ginger beer, and then found the slug, and she suffered shock. The House of Lords considered that the manufacturer would be accountable to take rational responsibility over the operating route. The woman sued the manufacturer of her physical injury; however, the manufacturer refused to take liable because there was no contract between the woman and the ginger beer manufacturer. However, in the decision, Lord Atkins laid out the principle, well known as the neighbour principle, in favour of the plaintiffs.

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In other words, there is a duty of care towards anyone who is reasonables foreseeable as likely to be harmed by carelessness.

A similar liability was imposed upon a distributor who re-bottled defective hair-dye (Watson v. Buckley (1940)) and upon manufacturers who failed to rinse out a chemical from fabric

from which they made underpants. The chemical was harmful to a small minority of persons, and caused the plaintiff to contact dermatitis.

DUTY OF CARE IN RELATING PURE ECONOMIC LOSS

The major steps taken by the courts to increase the range of liability were ...

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